Helping seniors preserve health and financial security for themselves and their loved ones.

Friday, April 17, 2015

New Law Raises Medicare Premiums for Higher-Income Retirees

A new law means wealthier Medicare beneficiaries will be
paying more for their Part B and Part D coverage in the future.

The Medicare
Access and CHIP Reauthorization Act of 2015 was signed by the President on
April 16, 2015. In addition to increasing Medicare premiums for wealthier
Medicare recipients, the law also sets a new formula for calculating payments
to doctors and other providers who treat Medicare patients. It passed Congress
by overwhelming margins.

Medicare Part B covers physician
services, outpatient services, and some home health and preventive services. It
is financed in part by beneficiary premiums which traditionally had been set at
25% of estimated program costs. Medicare Part D covers outpatient prescription
drugs. Its cost is also funded in part through beneficiary premiums.

Since 2007 higher income
beneficiaries have had to pay higher premiums. Several income brackets were created with enrollees in higher brackets paying a greater percentage of program costs.

In 2015 individuals with modified adjusted gross income (MAGI)
of $85,000 or less and couples with $170,000 or less pay only the base Part B
premium of $104.90. But, beneficiaries with incomes between $85,000 and
$107,000 (couples between $170,000 and $214,000) pay 35% of program costs or
$146.90.

Beneficiaries above $214,000 (and couples above $428,000) pay
the top monthly premiums of $335.70 in 2015, more than 3 times the base amount. Higher income beneficiaries likewise pay
higher premiums for their Part D coverage. See Medicare Premium Rules
for Higher-Income Beneficiaries.

Beginning in 2018, the new law will raise the premiums due from many
higher-income enrollees. It does this mainly by lowering the thresholds at which beneficiaries must pay higher applicable percentages
of program costs. For example, the percentage of program costs paid by Medicare beneficiaries
with MAGI between $133,501 and $160,000 ($267,001-$320,000 for a couple) will
increase from 50 percent to 65 percent. And the income threshold for the
highest premium (80 % of program costs) will be lowered to $160,001 (from
$214,000) for individuals and $320,001 (from $428,000) for couples.

Here are the
2018 premium thresholds for individual beneficiaries:

If the modified adjusted gross income is: Percentage

More than $85,000 but not more than $107,00035%

More than $107,001 but not more than $133,50050%

More than $133,501 but not more than $160,00065%

More than $160,00080%

Here are the
2018 thresholds for couples:

If the modified adjusted gross income is: Percentage

More than $170,001 but not more than $214,00035%

More than $214,001 but not more than $267,00050%

More than $267,001 but not more than $320,00065%

More than $320,00080%

The law also reduces future inflation adjustments to the
brackets. Prior law froze the income thresholds through 2019, at
which point they were to be indexed to inflation as if they had
not been frozen. But under the new law, any prior inflation will be disregarded and the threshold
for inflation will be based on the brackets as they are in 2019. Reducing the inflation adjustment
in this manner will increase the number of beneficiaries who will be subject to higher
Medicare premiums.

In determining your income for purposes of computing your
Medicare premiums for Parts B and D, Social Security uses your modified
adjusted gross income as reported on your IRS tax return from 2 years prior. (This
is the most recent tax return information provided to Social Security by the
IRS). This means that your Medicare premiums in 2018 will be determined by your MAGI as
shown on your 2016 income tax return.

Follow me on Twitter

Super Lawyers

AVVO

PAELA

About Me

I am a Pennsylvania lawyer with over 35 years experience in estate planning and elder law. I was selected by US News Best Lawyers® as its Lawyer of the Year in Elder Law for 2014 for the Harrisburg, Pennsylvania metropolitan region.
I am of counsel to Marshall, Parker and Weber, a law firm which has offices in Williamsport, Jersey Shore, Wilkes-Barre and Scranton, Pennsylvania. I am past President and a founder of PAELA (the Pennsylvania Association of Elder Law Attorneys). However, the views expressed on this site are my own and not those of PAELA or of Marshall, Parker and Weber.
Most importantly I am a husband, father and grandfather.